573 F.Supp.3d 977
D. Maryland2021Background
- Cordish Companies (Maryland) sued its insurer, Affiliated FM (AFM), after AFM denied a business-interruption claim for losses from COVID‑19 and related government closure orders under an "all‑risk" policy covering 97 properties.
- The Policy (effective Feb. 28, 2020–Feb. 28, 2021) provides business‑interruption and extensions (Attraction Property, Civil Authority, Supply Chain) but limits recovery to losses "directly resulting from physical loss or damage of the type insured."
- The Policy contains a Contamination Exclusion that defines "contamination" to include viruses and excludes "contamination, and any cost due to contamination including the inability to use or occupy property."
- Cordish alleged SARS‑CoV‑2 contaminates surfaces and caused closures and lost revenue; AFM argued the virus causes no tangible alteration and that the Contamination and Loss‑of‑Use exclusions bar coverage.
- The court applied Maryland law, allowed Cordish a surreply, struck a substantive response to a defendant supplemental notice, treated AFM’s motion as a Rule 12(c) motion, and granted judgment for AFM.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether COVID‑19 contamination constitutes "physical loss or damage" to trigger business‑interruption coverage | Virus is a physical substance that contaminates surfaces and thus causes physical loss/damage | Virus does not cause tangible or structural alteration; economic loss alone cannot trigger coverage | "Physical loss or damage" is unambiguous and requires tangible/material alteration or loss of use/uninhabitability; COVID‑19 allegations insufficient |
| Whether Civil Authority extension is triggered by government closure orders | Orders prohibited access as a direct result of virus contamination nearby, so extension applies | Civil Authority coverage requires physical damage to insured property or property within five miles; shutdowns based on pandemic fear do not satisfy that requirement | Not triggered: plaintiff failed to plausibly allege physical damage at or within the required proximity |
| Whether the Contamination Exclusion bars Cordish's claimed losses | Exclusion applies only to "costs" of contamination (e.g., cleanup, relocation), not to business‑interruption revenue losses | Exclusion explicitly bars "contamination, and any cost due to contamination including the inability to use or occupy property," which covers loss of use and related income losses | Exclusion unambiguously bars losses from contamination including inability to use/occupy property; it precludes Cordish's claims |
| Procedural: Motions to file surreply and to strike plaintiff's response to supplemental authority | Cordish sought leave to file a surreply to address a new case FM cited; also filed a substantive response to FM's supplemental notices | FM opposed surreply and moved to strike plaintiff's substantive response to FM's short notices | Court granted leave to file the surreply and granted FM's motion to strike plaintiff's substantive response |
Key Cases Cited
- Port Auth. of New York & New Jersey v. Affiliated FM Ins. Co., 311 F.3d 226 (3d Cir.) (presence of asbestos does not constitute physical loss unless structure rendered unusable; physical loss requires distinct, demonstrable alteration)
- Nat'l Ink & Stitch, LLC v. State Auto Prop. & Cas. Ins. Co., 435 F. Supp. 3d 679 (D. Md.) (ransomware alleged to have rendered software unusable — insurer liability found distinguishable from virus contamination claims)
- Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 487 F. Supp. 3d 834 (N.D. Cal.) (courts require an outside physical force causing a detrimental change in property capabilities to find "direct physical loss")
- Tria WS LLC v. American Automobile Ins. Co., 530 F. Supp. 3d 533 (E.D. Pa.) (terms like "repair," "rebuild," and "replace" indicate requirement of tangible physical harm for coverage)
- Hartford Ins. Co. of Midwest v. Mississippi Valley Gas Co., [citation="181 F. App'x 465"] (5th Cir.) (economic losses or intangible harms do not satisfy the policy requirement of "physical" loss)